Retail sales increased 1.1% in February, easily beating the consensus expected 0.5%, and are up 4.6% versus a year ago.Sales excluding autos were up 1.0% in February (1.2% including revisions for December/January), beating the consensus expected 0.5%. Sales ex-autos are up 3.9% in the past year.The gain in sales in February was led by gas, autos, and non-store retailers (internet/mail-order). The largest declines were for restaurant/bars and furniture.Sales excluding autos, building materials, and gas were up 0.4% in February. Even if unchanged in March, these sales will be up at a 4.5% annual rate in Q1 versus the Q4 average.Implications: So much for the theory that the end of the payroll tax cut was going to kill the consumer. Instead of being focused on relatively small changes in tax policy, analysts need to focus on the very loose stance of monetary policy, which is now gaining traction. Overall retail sales increased the most in five months in February and were revised up for January. Yes, much of the gain was due to higher gas prices, but even “core” sales, which exclude autos, building materials, and gas, rose a healthy 0.4% in February. These figures are consistent with our forecast that both real GDP growth and real (inflation-adjusted) consumer spending increase at about a 2.5% annual rate in Q1, a noticeable acceleration from the end of last year. For 2013, we still expect two major themes to play out for the consumer: first, an acceleration in consumer spending growth despite the recent tax hike; second, a transition away from growth in auto sales and toward other areas, like furniture, appliances, and building materials. Consumer spending should accelerate because of continued growth in jobs, hours, and wages. In addition, households have the lowest financial obligations ratio since the early 1980s. (The share of after-tax income they need to make recurring monthly payments, such as mortgages, rent, car loans/leases, as well as debt service on credit cards, student loans and other lending arrangements.) Meanwhile, the upturn in home building in the past 18+ months means more rooms for appliances, electronics, and furniture. In other news this morning, import prices were up 1.1% in February. The gain was all due to oil; import prices excluding petroleum were unchanged. In the past year, import prices are down 0.3% overall and up 0.3% ex-petroleum, so little change. Export prices were up 0.8% in February and up 1.5% versus a year ago. Farm products are leading the rise in export prices. Ex-agriculture, prices were up 0.6% in February and are unchanged in the past year. We still expect more inflation in the trade sector in the year ahead due to loose monetary policy.

That makes sense. A share of a global company is not entirely a dollar (or any other currency) based asset. You are buying in a sense a piece of their market share in a global industry. That involves plenty of risk but is better than holding dollars guaranteed to go down in value while earning 0% interest. The post calculating the Dow in gold terms or silver instead of dollars illustrates that we aren't really moving forward, just trying to slow the rate of moving backward. For me it is real estate. By buying low, buying smart and adding value i believe I can still yield after-inflation appreciation of zero over the long run which is sadly better than most dollar-based assets.

Wesbury closes with: "We still expect more inflation in the trade sector in the year ahead due to loose monetary policy."

For an eternal optimist, that is quite a candid warning.-------------------------------------------------------------

Many employers believe that one of the best ways to raise their profit margin is to cut labor costs. But companies like QuikTrip, the grocery store chain Trader Joe’s, and Costco Wholesale are proving that the decision to offer low wages is a choice, not an economic necessity. All three are low-cost retailers, a sector that is traditionally known for relying on part-time, low-paid employees. Yet these companies have all found that the act of valuing workers can pay off in the form of increased sales and productivity.

View Photo Gallery — Rhode Island town relies on food stamps: In Woonsocket, R.I., a third of the residents use SNAP, formerly known as food stamps, to pay for groceries. That means the businesses in the struggling town also rely on the program to survive.

By Eli Saslow,

Published: March 16

WOONSOCKET, R.I. – The economy of Woonsocket was about to stir to life. Delivery trucks were moving down river roads, and stores were extending their hours. The bus company was warning riders to anticipate “heavy traffic.” A community bank, soon to experience a surge in deposits, was rolling a message across its electronic marquee on the night of Feb. 28: “Happy shopping! Enjoy the 1st.”

In the heart of downtown, Miguel Pichardo, 53, watched three trucks jockey for position at the loading dock of his family-run International Meat Market. For most of the month, his business operated as a humble milk-and-eggs corner store, but now 3,000 pounds of product were scheduled for delivery in the next few hours. He wiped the front counter and smoothed the edges of a sign posted near his register. “Yes! We take Food Stamps, SNAP, EBT!”

Graphic

State residents who receive SNAP

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“Today, we fill the store up with everything,” he said. “Tomorrow, we sell it all.”

At precisely one second after midnight, on March 1, Woonsocket would experience its monthly financial windfall — nearly $2 million from the Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps. Federal money would be electronically transferred to the broke residents of a nearly bankrupt town, where it would flow first into grocery stores and then on to food companies, employees and banks, beginning the monthly cycle that has helped Woonsocket survive.

Three years into an economic recovery, this is the lasting scar of collapse: a federal program that began as a last resort for a few million hungry people has grown into an economic lifeline for entire towns. Spending on SNAP has doubled in the past four years and tripled in the past decade, surpassing $78 billion last year. A record 47 million Americans receive the benefit — including 13,752 in Woonsocket, one-third of the town’s population, where the first of each month now reveals twin shortcomings of the U.S. economy:

So many people are forced to rely on government support.

The government is forced to support so many people.

The 1st is always circled on the office calendar at International Meat Market, where customers refer to the day in the familiar slang of a holiday. It is Check Day. Milk Day. Pay Day. Mother’s Day.

“Uncle Sam Day,” Pichardo said now, late on Feb. 28, as he watched new merchandise roll off the trucks. Out came 40 cases of Ramen Noodles. Out came 230 pounds of ground beef and 180 gallons of orange juice.

SNAP enrollment in Rhode Island had been rising for six years, up from 73,000 people to nearly 180,000, and now three-quarters of purchases at International Meat Market are paid for with Electronic Benefit Transfer (EBT) cards. Government money had in effect funded the truckloads of food at Pichardo’s dock . . . and the three part-time employees he had hired to unload it . . . and the walk-in freezer he had installed to store surplus product . . . and the electric bills he paid to run that freezer, at nearly $2,000 each month.

Pichardo’s profits from SNAP had also helped pay for International Meat Market itself, a 10-aisle store in a yellow building that he had bought and refurbished in 2010, when the rise in government spending persuaded him to expand out of a smaller market down the block.

Mortimer Zuckerman: The Great Recession Has Been Followed by the Grand Illusion

Don't be fooled by the latest jobs numbers. The unemployment situation in the U.S. is still dire.

The Great Recession is an apt name for America's current stagnation, but the present phase might also be called the Grand Illusion—because the happy talk and statistics that go with it, especially regarding jobs, give a rosier picture than the facts justify.

The country isn't really advancing. By comparison with earlier recessions, it is going backward. Despite the most stimulative fiscal policy in American history and a trillion-dollar expansion to the money supply, the economy over the last three years has been declining. After 2.4% annual growth rates in gross domestic product in 2010 and 2011, the economy slowed to 1.5% growth in 2012. Cumulative growth for the past 12 quarters was just 6.3%, the slowest of all 11 recessions since World War II.

And last year's anemic growth looks likely to continue. Sequestration will take $600 billion of government expenditures out of the economy over the next 10 years, including $85 billion this year alone. The 2% increase in payroll taxes will hit about 160 million workers and drain $110 billion from their disposable incomes. The Obama health-care tax will be a drag of more than $30 billion. The recent 50-cent surge in gasoline prices represents another $65 billion drag on consumer cash flow.

February's headline unemployment rate was portrayed as 7.7%, down from 7.9% in January. The dip was accompanied by huzzahs in the news media claiming the improvement to be "outstanding" and "amazing." But if you account for the people who are excluded from that number—such as "discouraged workers" no longer looking for a job, involuntary part-time workers and others who are "marginally attached" to the labor force—then the real unemployment rate is somewhere between 14% and 15%.

Enlarge ImageimageimageCorbis

Other numbers reported by the Bureau of Labor Statistics have deteriorated. The 236,000 net new jobs added to the economy in February is misleading—the gross number of new jobs included 340,000 in the part-time, low wage category. Many of the so-called net new jobs are second or third jobs going to people who are already working, rather than going to those who are unemployed.

The number of Americans unemployed for six months or longer went up by 89,000 in February to a total of 4.8 million. The average duration of unemployment rose to 36.9 weeks, up from 35.3 weeks in January. The labor-force participation rate, which measures the percentage of working-age people in the workforce, also dropped to 63.5%, the lowest in 30 years. The average workweek is a low 34.5 hours thanks to employers shortening workers' hours or asking employees to take unpaid leave.

Since World War II, it has typically taken 24 months to reach a new peak in employment after the onset of a recession. Yet the country is more than 60 months away from its previous high in 2007, and the economy is still down 3.2 million jobs from that year.

Just to absorb the workforce's new entrants, the U.S. economy needs to add 1.8 million to three million new jobs every year. At the current rate, it will be seven years before the jobs lost in the Great Recession are restored. Employers will need to make at least 300,000 hires every month to recover the ground that has been lost.

The job-training programs announced by the Obama administration in his State of the Union address are sensible, but they won't soon bridge the gap for workers with skills in science, technology, engineering and mathematics. Nor is there yet any reform of the patent system, which imposes long delays on innovators, inventors and entrepreneurs seeking approvals. It often takes two years to obtain the environmental health and safety permits to build a modern electronic plant, a lifetime in the tech world.

When employers can't expand or develop new lines because of the shortage of certain skills, the employment opportunities for the less skilled are also restricted. To help with this shortage, the administration's proposals for job-training programs do deserve support. The stress should be on vocational training, postsecondary education and every program that will broaden access to computer science and strengthen science, technology, engineering and math in high schools and at the university level.

But the payoffs from these programs are in the future, and it is vital today to increase the number of annual visas and grants of permanent residency status for foreigners skilled in science and technology. The current situation is preposterous: The brightest and best brains from all over the globe are attracted to American universities, but once they get their degrees America sends them packing. Keeping these foreigners out means they will compete against us in the industries that are growing here and around the world.

Well I have no idea what Mort Zuckerman is talking about that foreigners coming here for education are not staying her.

Here in NJ the entire health field, technology IT, university system is plumb with people from Asia, and Africa. So what is he talking about.

These people are hungrier than those of us who are born here. Except for the children of these foreigners who are often taught the value of extraordinary hard work compared to us who are taught to expect handouts.

Unfornutately many of these same people who work like demons are also Democrats. It seems the Asians are thus since after the civil rights acts of the 60's. While many believe in work ethic they also believe they have been wronged by the Whites, I guess.

And many do come from countries where votes are bought like the Crats do here.

Combine that with a Republican party that apparently protects labor coming here because this helps keep wages down and we have a perfect storm.

The Dow Jones and Standard & Poor’s 500 indexes reached record highs on Thursday, having completely erased the losses since the stock market’s last peak, in 2007. But instead of cheering, we should be very afraid.

Over the last 13 years, the stock market has twice crashed and touched off a recession: American households lost $5 trillion in the 2000 dot-com bust and more than $7 trillion in the 2007 housing crash. Sooner or later — within a few years, I predict — this latest Wall Street bubble, inflated by an egregious flood of phony money from the Federal Reserve rather than real economic gains, will explode, too.

Since the S.&P. 500 first reached its current level, in March 2000, the mad money printers at the Federal Reserve have expanded their balance sheet sixfold (to $3.2 trillion from $500 billion). Yet during that stretch, economic output has grown by an average of 1.7 percent a year (the slowest since the Civil War); real business investment has crawled forward at only 0.8 percent per year; and the payroll job count has crept up at a negligible 0.1 percent annually. Real median family income growth has dropped 8 percent, and the number of full-time middle class jobs, 6 percent. The real net worth of the “bottom” 90 percent has dropped by one-fourth. The number of food stamp and disability aid recipients has more than doubled, to 59 million, about one in five Americans.

So the Main Street economy is failing while Washington is piling a soaring debt burden on our descendants, unable to rein in either the warfare state or the welfare state or raise the taxes needed to pay the nation’s bills. By default, the Fed has resorted to a radical, uncharted spree of money printing. But the flood of liquidity, instead of spurring banks to lend and corporations to spend, has stayed trapped in the canyons of Wall Street, where it is inflating yet another unsustainable bubble.

When it bursts, there will be no new round of bailouts like the ones the banks got in 2008. Instead, America will descend into an era of zero-sum austerity and virulent political conflict, extinguishing even today’s feeble remnants of economic growth.

THIS dyspeptic prospect results from the fact that we are now state-wrecked. With only brief interruptions, we’ve had eight decades of increasingly frenetic fiscal and monetary policy activism intended to counter the cyclical bumps and grinds of the free market and its purported tendency to underproduce jobs and economic output. The toll has been heavy.

As the federal government and its central-bank sidekick, the Fed, have groped for one goal after another — smoothing out the business cycle, minimizing inflation and unemployment at the same time, rolling out a giant social insurance blanket, promoting homeownership, subsidizing medical care, propping up old industries (agriculture, automobiles) and fostering new ones (“clean” energy, biotechnology) and, above all, bailing out Wall Street — they have now succumbed to overload, overreach and outside capture by powerful interests. The modern Keynesian state is broke, paralyzed and mired in empty ritual incantations about stimulating “demand,” even as it fosters a mutant crony capitalism that periodically lavishes the top 1 percent with speculative windfalls.

The culprits are bipartisan, though you’d never guess that from the blather that passes for political discourse these days. The state-wreck originated in 1933, when Franklin D. Roosevelt opted for fiat money (currency not fundamentally backed by gold), economic nationalism and capitalist cartels in agriculture and industry.

Under the exigencies of World War II (which did far more to end the Depression than the New Deal did), the state got hugely bloated, but remarkably, the bloat was put into brief remission during a midcentury golden era of sound money and fiscal rectitude with Dwight D. Eisenhower in the White House and William McChesney Martin Jr. at the Fed

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Then came Lyndon B. Johnson’s “guns and butter” excesses, which were intensified over one perfidious weekend at Camp David, Md., in 1971, when Richard M. Nixon essentially defaulted on the nation’s debt obligations by finally ending the convertibility of gold to the dollar. That one act — arguably a sin graver than Watergate — meant the end of national financial discipline and the start of a four-decade spree during which we have lived high on the hog, running a cumulative $8 trillion current-account deficit. In effect, America underwent an internal leveraged buyout, raising our ratio of total debt (public and private) to economic output to about 3.6 from its historic level of about 1.6. Hence the $30 trillion in excess debt (more than half the total debt, $56 trillion) that hangs over the American economy today.

This explosion of borrowing was the stepchild of the floating-money contraption deposited in the Nixon White House by Milton Friedman, the supposed hero of free-market economics who in fact sowed the seed for a never-ending expansion of the money supply. The Fed, which celebrates its centenary this year, fueled a roaring inflation in goods and commodities during the 1970s that was brought under control only by the iron resolve of Paul A. Volcker, its chairman from 1979 to 1987.

Under his successor, the lapsed hero Alan Greenspan, the Fed dropped Friedman’s penurious rules for monetary expansion, keeping interest rates too low for too long and flooding Wall Street with freshly minted cash. What became known as the “Greenspan put” — the implicit assumption that the Fed would step in if asset prices dropped, as they did after the 1987 stock-market crash — was reinforced by the Fed’s unforgivable 1998 bailout of the hedge fund Long-Term Capital Management.

That Mr. Greenspan’s loose monetary policies didn’t set off inflation was only because domestic prices for goods and labor were crushed by the huge flow of imports from the factories of Asia. By offshoring America’s tradable-goods sector, the Fed kept the Consumer Price Index contained, but also permitted the excess liquidity to foster a roaring inflation in financial assets. Mr. Greenspan’s pandering incited the greatest equity boom in history, with the stock market rising fivefold between the 1987 crash and the 2000 dot-com bust.

Soon Americans stopped saving and consumed everything they earned and all they could borrow. The Asians, burned by their own 1997 financial crisis, were happy to oblige us. They — China and Japan above all — accumulated huge dollar reserves, transforming their central banks into a string of monetary roach motels where sovereign debt goes in but never comes out. We’ve been living on borrowed time — and spending Asians’ borrowed dimes.

This dynamic reinforced the Reaganite shibboleth that “deficits don’t matter” and the fact that nearly $5 trillion of the nation’s $12 trillion in “publicly held” debt is actually sequestered in the vaults of central banks. The destruction of fiscal rectitude under Ronald Reagan — one reason I resigned as his budget chief in 1985 — was the greatest of his many dramatic acts. It created a template for the Republicans’ utter abandonment of the balanced-budget policies of Calvin Coolidge and allowed George W. Bush to dive into the deep end, bankrupting the nation through two misbegotten and unfinanced wars, a giant expansion of Medicare and a tax-cutting spree for the wealthy that turned K Street lobbyists into the de facto office of national tax policy. In effect, the G.O.P. embraced Keynesianism — for the wealthy.

The explosion of the housing market, abetted by phony credit ratings, securitization shenanigans and willful malpractice by mortgage lenders, originators and brokers, has been well documented. Less known is the balance-sheet explosion among the top 10 Wall Street banks during the eight years ending in 2008. Though their tiny sliver of equity capital hardly grew, their dependence on unstable “hot money” soared as the regulatory harness the Glass-Steagall Act had wisely imposed during the Depression was totally dismantled.

Within weeks of the Lehman Brothers bankruptcy in September 2008, Washington, with Wall Street’s gun to its head, propped up the remnants of this financial mess in a panic-stricken melee of bailouts and money-printing that is the single most shameful chapter in American financial history.

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There was never a remote threat of a Great Depression 2.0 or of a financial nuclear winter, contrary to the dire warnings of Ben S. Bernanke, the Fed chairman since 2006. The Great Fear — manifested by the stock market plunge when the House voted down the TARP bailout before caving and passing it — was purely another Wall Street concoction. Had President Bush and his Goldman Sachs adviser (a k a Treasury Secretary) Henry M. Paulson Jr. stood firm, the crisis would have burned out on its own and meted out to speculators the losses they so richly deserved. The Main Street banking system was never in serious jeopardy, ATMs were not going dark and the money market industry was not imploding.

Instead, the White House, Congress and the Fed, under Mr. Bush and then President Obama, made a series of desperate, reckless maneuvers that were not only unnecessary but ruinous. The auto bailouts, for example, simply shifted jobs around — particularly to the aging, electorally vital Rust Belt — rather than saving them. The “green energy” component of Mr. Obama’s stimulus was mainly a nearly $1 billion giveaway to crony capitalists, like the venture capitalist John Doerr and the self-proclaimed outer-space visionary Elon Musk, to make new toys for the affluent.

Less than 5 percent of the $800 billion Obama stimulus went to the truly needy for food stamps, earned-income tax credits and other forms of poverty relief. The preponderant share ended up in money dumps to state and local governments, pork-barrel infrastructure projects, business tax loopholes and indiscriminate middle-class tax cuts. The Democratic Keynesians, as intellectually bankrupt as their Republican counterparts (though less hypocritical), had no solution beyond handing out borrowed money to consumers, hoping they would buy a lawn mower, a flat-screen TV or, at least, dinner at Red Lobster.

But even Mr. Obama’s hopelessly glib policies could not match the audacity of the Fed, which dropped interest rates to zero and then digitally printed new money at the astounding rate of $600 million per hour. Fast-money speculators have been “purchasing” giant piles of Treasury debt and mortgage-backed securities, almost entirely by using short-term overnight money borrowed at essentially zero cost, thanks to the Fed. Uncle Ben has lined their pockets.

If and when the Fed — which now promises to get unemployment below 6.5 percent as long as inflation doesn’t exceed 2.5 percent — even hints at shrinking its balance sheet, it will elicit a tidal wave of sell orders, because even a modest drop in bond prices would destroy the arbitrageurs’ profits. Notwithstanding Mr. Bernanke’s assurances about eventually, gradually making a smooth exit, the Fed is domiciled in a monetary prison of its own making.

While the Fed fiddles, Congress burns. Self-titled fiscal hawks like Paul D. Ryan, the chairman of the House Budget Committee, are terrified of telling the truth: that the 10-year deficit is actually $15 trillion to $20 trillion, far larger than the Congressional Budget Office’s estimate of $7 trillion. Its latest forecast, which imagines 16.4 million new jobs in the next decade, compared with only 2.5 million in the last 10 years, is only one of the more extreme examples of Washington’s delusions.

Even a supposedly “bold” measure — linking the cost-of-living adjustment for Social Security payments to a different kind of inflation index — would save just $200 billion over a decade, amounting to hardly 1 percent of the problem. Mr. Ryan’s latest budget shamelessly gives Social Security and Medicare a 10-year pass, notwithstanding that a fair portion of their nearly $19 trillion cost over that decade would go to the affluent elderly. At the same time, his proposal for draconian 30 percent cuts over a decade on the $7 trillion safety net — Medicaid, food stamps and the earned-income tax credit — is another front in the G.O.P.’s war against the 99 percent.

Without any changes, over the next decade or so, the gross federal debt, now nearly $17 trillion, will hurtle toward $30 trillion and soar to 150 percent of gross domestic product from around 105 percent today. Since our constitutional stasis rules out any prospect of a “grand bargain,” the nation’s fiscal collapse will play out incrementally, like a Greek/Cypriot tragedy, in carefully choreographed crises over debt ceilings, continuing resolutions and temporary budgetary patches

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The future is bleak. The greatest construction boom in recorded history — China’s money dump on infrastructure over the last 15 years — is slowing. Brazil, India, Russia, Turkey, South Africa and all the other growing middle-income nations cannot make up for the shortfall in demand. The American machinery of monetary and fiscal stimulus has reached its limits. Japan is sinking into old-age bankruptcy and Europe into welfare-state senescence. The new rulers enthroned in Beijing last year know that after two decades of wild lending, speculation and building, even they will face a day of reckoning, too.

THE state-wreck ahead is a far cry from the “Great Moderation” proclaimed in 2004 by Mr. Bernanke, who predicted that prosperity would be everlasting because the Fed had tamed the business cycle and, as late as March 2007, testified that the impact of the subprime meltdown “seems likely to be contained.” Instead of moderation, what’s at hand is a Great Deformation, arising from a rogue central bank that has abetted the Wall Street casino, crucified savers on a cross of zero interest rates and fueled a global commodity bubble that erodes Main Street living standards through rising food and energy prices — a form of inflation that the Fed fecklessly disregards in calculating inflation.

These policies have brought America to an end-stage metastasis. The way out would be so radical it can’t happen. It would necessitate a sweeping divorce of the state and the market economy. It would require a renunciation of crony capitalism and its first cousin: Keynesian economics in all its forms. The state would need to get out of the business of imperial hubris, economic uplift and social insurance and shift its focus to managing and financing an effective, affordable, means-tested safety net.

All this would require drastic deflation of the realm of politics and the abolition of incumbency itself, because the machinery of the state and the machinery of re-election have become conterminous. Prying them apart would entail sweeping constitutional surgery: amendments to give the president and members of Congress a single six-year term, with no re-election; providing 100 percent public financing for candidates; strictly limiting the duration of campaigns (say, to eight weeks); and prohibiting, for life, lobbying by anyone who has been on a legislative or executive payroll. It would also require overturning Citizens United and mandating that Congress pass a balanced budget, or face an automatic sequester of spending.

It would also require purging the corrosive financialization that has turned the economy into a giant casino since the 1970s. This would mean putting the great Wall Street banks out in the cold to compete as at-risk free enterprises, without access to cheap Fed loans or deposit insurance. Banks would be able to take deposits and make commercial loans, but be banned from trading, underwriting and money management in all its forms.

It would require, finally, benching the Fed’s central planners, and restoring the central bank’s original mission: to provide liquidity in times of crisis but never to buy government debt or try to micromanage the economy. Getting the Fed out of the financial markets is the only way to put free markets and genuine wealth creation back into capitalism.

That, of course, will never happen because there are trillions of dollars of assets, from Shanghai skyscrapers to Fortune 1000 stocks to the latest housing market “recovery,” artificially propped up by the Fed’s interest-rate repression. The United States is broke — fiscally, morally, intellectually — and the Fed has incited a global currency war (Japan just signed up, the Brazilians and Chinese are angry, and the German-dominated euro zone is crumbling) that will soon overwhelm it. When the latest bubble pops, there will be nothing to stop the collapse. If this sounds like advice to get out of the markets and hide out in cash, it is.

When was the last time David stockman ever got anything right? If he says anything coherent and sensible here it is that our problems have to do with too much government spending. Well, duh. All the rest of his rant is incoherent.

When it comes to assessing the economy's potential for growth, I believe it is perfectly reasonable, if not compelling, to give growth the benefit of the doubt—to have a presumption of growth. Here are some reasons:

A friend writes:====================================Received this blog/ article from a colleague's friend. The author is a retired Merrill Lynch broker and now is in Pakistan as a US representative of sorts. Curious what all you think?

”With Cyprus, we have evidence that "The camel's nose is under the edge of the tent." The outright confiscation of bank funds above insured levels of 100,000 Euros, has set the stage for governments everywhere to confiscate wealth in order to push off the day of debt reckoning. The paradox is that the results might bring down the price of gold in the short and medium term in US dollars. Perhaps for several year's.

Money is starting to fly out of the club Med countries. If creditors like Germany, can demand that I as a depositor lose 40-60% of my funds because of toxic government loans, then where do I run? Gold is the answer for part of the world. As the EU and Britain go down, they'll pull funds and buy metals, but metals are not very liquid and have high commissions buying and selling. That means slow motion foreign bank runs will buy dollars which will flood into US Treasuries, and the Fed will be able to shove trillions more US debt out the door in an attempt to maintain the economy and yet not generate inflation. As other economies collapse, and bank funds are confiscated in Europe, savings will stream into the dollar and treasuries, and for a time, as the rest of the world devalues, gold will go up in their currencies, and probably down in ours.

The dollar, as refuge of last resort, will grow stronger and stronger even as our national debt explodes more than it is right now. The old adage is that if something cannot continue, it stops. And when the turn comes, US interest rates will explode with inflation, and gold, which could drop lower, will also rocket as people wake up to the fact that the strong dollar is a false front where demand has been irrationally pushed to astronomical heights by international incompetence and theft.

Cyprus is the first tent of cards at the very peak of the financial house, to fall. The amount stolen from depositors is tiny. Perhaps six billion Euros. But the damage to confidence in that country will be massive, as money scurries out, never to return. It will take a miracle for them to remain in the EU. When the same pressures finally kill Greece, can Italy be far behind? Spain? The world's richest 5% are scrambling into dollars, and as the Euro goes down, the money going into gold might be enough to make it go up or stay the same in terms of dollars.

But if 15% of Europe's excess wealth runs to gold, and 70% runs to treasuries, with the last 15% put in mattresses and elsewhere, my guess is that treasuries will win temporarily, and gold will go down in terms of dollars. The trick will be knowing when the bulk of the world awakens from a trance, and realizes the treasuries are just paper and promises, like everywhere else. I never really thought I'd live to see it, but it's time to really batten down and ready for the storm. Bernanke will pull out all the stops, but I just can't see it going another three or four years.

Of course, his pumping 85,000,000,000 a month into the economy is pushing stocks and assets higher and higher, so another crash is right around the corner there as well. The MOMENT he signals a stop or slowdown, the market crashes, but the beauty is that if the rest of the world is collapsing first, he doesn't HAVE to stop, because the rich in the EU countries will suck up all the US debt and promises.

There is no way to determine when "irrational exuberance" comes to an end, and it could be that the Dow will hit 20,000 and suck more money out of gold, forcing it down to $1,000 an ounce. If it does, buy more. If silver drops from $28 to $20, load up. I know I will. The whirlwind is coming, guys, and the banking theft in Cyprus is just a cool breeze hinting at its approach”

"The care of human life and happiness, and not their destruction, is the first and only legitimate object of good government." --Thomas Jefferson

Employers added 88,000 jobs in March, according to the latest unemployment report from the Labor Department. That's down from the 196,000/month average over the last six months. Yet miraculously, the headline unemployment rate dropped from 7.7 percent to 7.6 percent. As with previous drops, however, that's because a staggering 663,000 people simply left the workforce in March and gave up looking for a job. A record 90 million Americans are no longer even seeking employment.

Since the "surprise" drop in unemployment the month before Obama was narrowly re-elected last year, he has focused only on the unemployment number. However, given that his agenda is now to raise even more taxes and further expand government programs and regulations, Obama will insist that even though that number ticked down, it would have been substantially lower if not for the Republican Sequester.

His apologists -- namely economic adviser Austan Goolsbee and the Associated Press -- wasted little time in advancing this line of blame. Goolsbee said, "Now you're going to, interestingly, start seeing a lot of discussion about maybe the sequester's a bigger deal than people thought it was." The AP argued, "The weakness may signal that companies were worried last month about steep government spending cuts that began on March 1."

Obama certainly won't focus on the fact that the lower unemployment numbers mask the more important number that reflects his failed economic policies. The most significant economic news in March is, again, the record number of Americans who are no longer looking for work, and that number has gone up every month in the last two years. The labor participation rate has dropped again, from 63.5 percent to 63.3 percent -- the worst since the height of the Carter malaise in 1979.

Some other numbers: The U-6 unemployment rate (a broader measure) fell from 14.3 percent to 13.8 percent, the lowest since before Obama took office. But, if labor participation was the same as in March just one year ago, the headline unemployment rate would be 8.3 percent. If it remained the same as in January 2009, the rate would be 10.9 percent. (This number should be a regular talking point for our side i.e. that with the same participation rate, unemployment is 3% higher than as reported)

Finally, the Obama budget is due to be released next Wednesday. Look for him to use these disappointing jobs numbers as leverage to call for more government "stimulus."

Non-farm payrolls increased 88,000 in March, well below the consensus expected 190,000. Including revisions to prior months, nonfarm payrolls were up 149,000.

Private sector payrolls increased 95,000 in March, also well below consensus expectations. The largest gains were for professional & business services (+51,000) and education & health care (+44,000). Government payrolls declined 7,000.The unemployment rate fell to 7.6% (7.574%) in March from 7.7% (7.736%) in February.Average weekly earnings – cash earnings, excluding benefits – were unchanged in March but up 1.8% from a year ago.Implications: Get a grip. The report on the labor market is not strong, but it’s not the very weak one many are saying. The most absurd commentary is that the federal spending sequester is hurting. Excluding the Post Office, which is not affected by the sequester, government jobs were up 5,000 in March versus an average decline of 4,000 per month in the past year. The key negative today is that nonfarm payrolls only grew 88,000 in March, substantially below consensus expectations. But including upward revisions to prior months, the net gain was a respectable 149,000. (Nonfarm payrolls are up 159,000/month in the past year.) Meanwhile, average weekly hours ticked up to 34.6 from 34.5, the equivalent of 330,000 jobs. As a result of the longer workweek, total hours worked increased 0.3% in March and are up 2.1% from a year ago. Average hourly earnings were unchanged in March, but still up 1.8% from a year ago. As a result, total cash earnings are up 3.9% from a year ago, or about 2.2% when adjusted for inflation. Ironically, it was the household survey, which generated the best headline, where the details were the weakest. The unemployment rate dipped to 7.6% in March, a new recovery low. But it was due to a 496,000 drop in the labor force while civilian employment, an alternative measure of jobs that includes small business startups, declined 206,000. Departures from the labor force pushed the participation rate down to 63.3%, the lowest since 1979. Keep in mind, however, that monthly changes in the labor force are volatile and in the past year the jobless rate has dropped 0.6 percentage points while the labor force is up 219,000. In other words, the downward trend in the jobless rate isn’t due to a shrinking labor force. The big question is how the Federal Reserve reacts. It says a jobless rate of 6.5% could get it to raise rates. But, today’s report undercuts its projection we won’t reach 6.5% until mid-2015; it supports our case for mid-2014. Some comments suggest an alternative indicator is the share of unemployed who have quit their old job before they have a new one, a sign of confidence. But the quit rate rose in March to 8.4%, so the Fed may have to look elsewhere if it wants an excuse not to raise rates in 2014. Obviously, the labor market is very far from perfect. The unemployment rate is way too high and payroll growth too slow. What’s holding us back is the huge increase in government, particularly transfers, over the past several years. Despite that, the plow horse economy keeps moving forward.

"if labor participation was the same as in March just one year ago, the headline unemployment rate would be 8.3 percent. If it remained the same as in January 2009, the rate would be 10.9 percent."

Still, we are just comparing with an already crashed economy. To just get back to where we were when the Pelosi-Reid-Obama nightmare began, we would need unemployment below 4% measured by today's low standards.

Which Obama policies aim to fix this? None of them do. The policies are all aimed at slow growth or making things worse. Raising tax rates on employers. Raising the bar for hiring the unskilled to their first job. Starting a massive new entitlement. Blocking an energy pipeline. Hiring 16,000(?) new IRS employees? Blocking reform of existing entitlements. Presenting budgets 5 years into this that never balance. Strangulating the financial sector. And keeping up the class warfare drumbeat instead of pulling the nation together. When did any of these awful policies ever grow an economy or reduce unemployment?

As Rush Limbaugh succinctly put it on his radio show this afternoon: "Folks, we are living in a dying country. There is just no other way to interpret this data. At least in 1979, which was the last time the labor participation rate was this low, we had an election in 1980 that turned things around. That didn't happen this time. We had a chance back in November to stop this and reverse course, and the American voters blew it."

Any economist who looks at this data and says that the economy is improving is either in complete denial or is lying:

Last week, The New York Times published former Reagan OMB Director David Stockman’s “sky is falling” critique of the current economy and financial markets. State Wrecked: The Corruption of Capitalism in America. Stockman says the US is broke – “fiscally, morally, intellectually” – and says “When the latest bubble pops, there will be nothing to stop the collapse….” He says investors should sit in cash.

The piece instantly achieved rock-star status. “What do you think of Stockman’s piece? He’s not a liberal…he’s a conservative…so, isn’t this something I should take seriously? Stockman isn’t a nutcase; shouldn’t we run for the hills now?”

The funny thing is that we agree with much of what Stockman writes. Government is too big. The Fed is making mistakes. TARP, QE, stimulus, the auto/union bailouts, and other government action were a mistake. We also agree that “there was never a remote threat of Great Depression 2.0 or of a financial nuclear winter.” If Hank Paulson and George Bush “stood firm” the crisis “would have burned out on its own.”

None of this is new, except for the part about the crisis not threatening a depression. Stockman really didn’t say anything that @ZeroHedge, Rick Santelli, Peter Schiff, Glenn Beck, Ron Paul, or a host of other free-market (and short-selling) types haven’t argued for the past four years.

The piece could have been written in 2012, or 2011, or 2010. It could even have been published in March 2009. After all, nothing new has really happened. Congress and the President were spending too much back then and still are today. The Fed was printing money rapidly in 2009 and still is today. Deficits were huge then, and still are today.Yet, for four years, economic data have been consistently and relentlessly positive – not booming, but positive. And for four years, corporate profits and market capitalization have climbed substantially. The S&P 500, including reinvested dividends, is up more than 150% since March 9, 2009, while corporate profits have more than doubled from the bottom. Real GDP has expanded for 15 consecutive quarters. Real consumption and real business fixed investment in equipment and software are both at all-time record highs. All of this is hard evidence that something good is happening.

But Stockman says the economy and Wall Street are, “inflated by an egregious flood of phony money from the Federal Reserve, rather than real economic gain.”

And this is where we fundamentally disagree. Despite all the arguments by the free-market, politically-motivated, short-sellers, positive developments are taking place. Right now…today. New inventions – the cloud, tablets, fracking, smartphones, 3D-printing, telecommunications, and on and on – are adding wealth, creating jobs, boosting profits and connecting the global economy at a rapid clip. The government didn’t generate any of these.

Yes, there are people caught in the web of government over-spending and crippling-regulation. Yes, the Fed has created too much fiat currency. Yes, big government is creating a large class of people who think living off the government is a right. But, the market is still working. Banks are not transmitting the Fed’s largesse; M2 is growing at a modest clip. Moreover, new technology is creating massive opportunities for those who grasp its power.

In other words, the sky is falling at the same time the sky is the limit. We don’t disagree with Stockman’s warning, but we completely disagree with his investment advice. Today, cash is a place for those with no faith at all in markets. Taking just the last several years of policy mistakes, the US may be on a course for Armageddon. But that ignores some major policy gains in the past 30+ years. Armageddon, if it ever comes, is a very long way off, nowhere close to the foreseeable future.

The screeching coming from CNBS and elsewhere this morning is amusing.

There's only one chart that matters, and it will, when recognized, blow up the stock market -- sending it down 50% or more.

It's this one:

That's it. And the ADP report this morning is showing the pathway to recognition, as construction has stalled and the destruction of job creation in small and mid-sized businesses exposed to Obamacare will finish it off.

I continue to maintain that we're in a time very similar to 2007, when the facts were on the table. Banks paying dividends with money they didn't have. Hedge funds that blow. Bubbles in crazy places, then housing, this time in subprime car lending, student loans and even Bitcon.

The transports are telling you that all is not well. CAT is confirming it. Copper is warning that we're in deep trouble internationally, and irrespective of the claim that "America benefits from everyone else's pain" that's only partially true -- in the end earnings are what drive stock prices, and the red flags are waving at warp speed on earnings.

To go along with this are rail car loadings. The trouble here is that baseline is in a serious downtrend -- and after halting its decline from 2008 to 2009 over the last year it has slid severely once more. There will be those who argue that this is "no big deal"; I disagree.

At the end of the day the premise behind the Fed's intervention in the market is that "cheap money" promotes hiring through an indirect process. But inherent in that process is a belief that the economic model from 1980 to 2007 can be restarted -- a model predicated on ever-larger amounts of leverage in the economy. That model had positive feedback that came from the bond market rally from 1980 to 2008 as well with yield compression helping to fuel the fire.

More than five years into this experiment the results are clear: It doesn't work.

I believe that by the time we get to the end of the year we will be looking back at these signs and asking "what the hell was I thinking?"

Credit expansion is not going to restart because it can't -- we have reached the terminus of that economic model, like it or not.

Weak U.S. jobs data on Friday confirmed the worst trading week this year for European and U.S. stocks, and now analysts are warning that investors should brace for further trouble ahead as fiscal tightening begins to take its toll.

Friday's jobs report came in well below expectations, raising concerns that the recovery in the world's largest economy is weakening. March's participation rate was at its lowest since 1979, according to the U.S. Bureau of Labor Statistics. Just 88,000 jobs were added to the economy last month, although the unemployment rate fell to 7.6 percent from 7.7 percent in February.

"In the labor market, at least, we see a real risk of even worse news down the line," Ian Shepherdson, chief economist at Pantheon Macroeconomic Advisors said in a research note on Monday.

(Read More: US Job Creation Plunges, but Rate Drops to 7.6%)

Weakening labor demand, not rising layoffs, is the key problem with the U.S. economy, according to Shepherdson. The weakening demand is mostly coming from smaller firms that are below the radar of the Institute for Supply Management (ISM) survey, which reflects national factory activity.

The National Federation of Small Business job survey has done a decent job in foreshadowing movements in payrolls in recent years, according to Shepherdson, and it's this report—due to be released on Tuesday—that's warning of troubled waters ahead, he said.

"While actual job creation appears to be rising, plans to create jobs [in March] took a dive, falling 4 points to a net zero percent of small employers who plan to increase total employment. It seems that the stamina for growth is waning," William C. Dunkelberg, chief economist for the NFIB said in a press release last week.

Looking at the figures, Pantheon's Shepherdson said there could be a degree of respite in the official employment numbers for the next couple of months, before a distinct change.

(Read More: Unemployment Rate Dip Offers Little Reason to Celebrate)

"The outlook then turns bleaker again. The survey does not signal an outright decline in payrolls over the next few months, but we cannot be sure it has bottomed out yet," Shepherdson said.

He cited fiscal tightening as the major reason behind the reverse. At the start of the year, the payroll tax that funds Social Security was raised two percentage points to its 2010 level of 6.2 percent. This was the largest component of tax increases approved by Congress in the resolution of the "fiscal cliff" that many believe will cause a significant hit to U.S. growth.

"You can't take more than 1.5 of GDP (gross domestic product) out of the economy more or less overnight and expect nothing bad to happen," Shepherdson said. "Markets—especially the Treasury market—are having a rethink of the fiscal-tightening-doesn't matter-much hypothesis. Good. It never made any sense."

U.S. equities responded negatively on Friday to the soft jobs data, government bond yields fell with the benchmark 10-year Treasury falling to its lowest yield so far this year. The dollar also depreciated against European currencies in response.

(Read More: Job-Seeking Teens Might Get a Break This Summer)

"The data support our view that the strong U.S. data flow in January and February is likely to give way to weaker data in (the second quarter), as fiscal headwinds are reflected in slower growth in demand, activity, and employment," Barclays said in a research note on Monday. "Although we have recently raised our forecast of (first quarter) GDP growth to 3.5 percent, which matches our latest tracking estimate for the quarter, we have kept our (second quarter) forecast at 1.5 percent."

In his Stockman reply in particular, Wesbury has reduced his optimism argument down to just investments. These indexes with a relatively small number of named companies that already do most of their business outside of the U.S. are not in imminent danger of total collapse - yet - in Wesbury's opinion.

Wesbury agrees at least in part with the warnings: "Yes, there are people caught in the web of government over-spending and crippling-regulation. Yes, the Fed has created too much fiat currency. Yes, big government is creating a large class of people who think living off the government is a right."

G M's piece regarding the jobs market can not change Wesbury's mind. Wesbury's argument that the investment outlook is good comes from a rear view mirror observation that the (stock) market has already been doing well while the labor market was doing horribly.

The unknown is this: How long and how far can these things run in opposite directions?

It didn't take much effort today to discover that Wesbury is a member of the Academic Advisory Council of the Federal Reserve Bank of Chicago. So - he certainly has an incentive to make the Fed look good. That in itself makes his pronouncements suspect in my opinion.

Further - He appears to have been wrong on almost every one of his predictions over the last 3 years. Want proof? Take a look at this CNN interview with him from December of 2009:

The 5% growth prediction in 2009 is bizarre in the context of Wesbury opposing the policies of Pelosi-Reid-Obama as the opposite of what is conducive to growth. A "V-shaped recovery", it was not.---Meanwhile the Dow just closed at a new record high.

With all due respect, most of us here are not concerned with the short-term direction of the stock market, but with the overall condition of the economy, which Wesbury, as demonstrated in my earlier post, has failed miserably to predict. The stock market is being helped tremendously IN THE SHORT TERM, by the Fed's monetary and interest-rate policy. Wesbury has a clear incentive to promote a rosy view, as he advises the Fed. As I told you in a previous conversation, this stock market defies all rationality. It is NOT supported by fundamentals. It is being pushed up by Fed policies and by the fact that other investment vehicles, due to extremely low interest rates, are poor alternatives to this irrational market at the moment. This cannot last, and will eventually come crashing down. Frankly, I have zero confidence in "Mr. Sunshine's" prognostications at this point.

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"You have enemies? Good. That means that you have stood up for something, sometime in your life." - Winston Churchill.

Ah, but what is the title of this thread? " , , , the stock market and other investment/savings strategies".

Therefore it seems relevant to me to note that most of us have missed a market that has gone from 6,500 to nearly 15,000. That is a REALLY big miss, and we need to Acknowledge it and address it!

As I see it, there are three basic answers possible here that can be proffered alone or in blend with the others:

1) As you write, this is a Fed induced bubble;2) The US is a "less bad" option than other countries and money that would usually be elsewhere is coming here;3) There are good things happening e.g. the dramatic decline of natural gas prices and the prospects for the US becoming an energy powerhouse on the world scene, technology (the cloud, 3d manufacturing, etc)

"Ah, but what is the title of this thread? , , , the stock market and other investment/savings strategies."

I find myself co-mingling these topics - as does Wesbury. We now know that the market can go up dramatically during the worst recovery in history, and yes, we missed it.

The lesson from the rear view mirror is that (assuming one had money available) we should have been buying at 6500 and any other point along that path - had we known. But looking backward does not mean we should be buying at 15,000.

Each investor can assess for themselves when it has all gone up too far too fast, or when it is the day before a real correction.

Last evening I asked a friend who manages investments at a major institution what they are advising at this point. He said they are emphasizing "balance" in the portfolios, and saying hold (versus buy or sell). Beyond his words my sense was extreme caution and certainly not exuberance as this market surpasses all expectations.----

Following link is an interesting piece addressing the question of what you should have done at DOW 6500 or even half way down from its previous peak: http://www.rbcwm-usa.com/resources/file-686836.pdf The answer was to buy in a bear market, using a case study of 1973-1974, and now 2008-2009. Is the corollary of that wisdom to sell in a bull market, or as we thought in 1999, is this time different?

No, just because retail sales fell 0.4% in March does not mean Keynes was right. Sequestration did not cause the decline. Nor did the end of the temporary 2% payroll tax cut, back in January, cause it either. As you can probably guess, we find these arguments without merit. Early last week we posted on our blog an analysis showing that the last three times Easter was so early and occurred in March, the actual report on retail sales has come in well below what our models were projecting. (Link) As a result, we trimmed our forecast for overall sales to -0.1%.

The actual report was -0.4%, which, statistically, is barely different than -0.1% for this data series. So, even though our revised forecast was still higher than the actual, we are not overly concerned about the decline. In other words, we think an early Easter is the key culprit behind the soft retail report for March – not some external government influence.

But even if you take the sales report at face value, it’s not evidence that the trajectory of economic growth has changed course. Last April and June, retail sales slumped by more than they did last month. But there was no payroll tax hike or major cut in spending.

In fact, volatility in sales data is normal. Between 2003 and 2006, a period of relatively strong growth lasting 48 months, retail sales dropped 0.4% or more in eleven different months. In other words, there is a very strong case that this is just normal statistical noise – possibly driven by seasonal factors.

To jump to any other conclusion is what Keynesians always try to do. They want to tie every drip, drop and dribble of economic activity to something the government has done. But, this is nonsense. And part of their problem is that what was supposed to happen when government spending soared and monetary policy got easy didn’t happen.

The economy never boomed; instead, it’s been a Plow Horse economy with moderate growth and a gradual decline in joblessness. We think big government has held back the economy and temporary tax cuts have nothing to do with creating sustained real growth. The sequester itself is good for the economy, because it means the private sector will grow relative to government. As a result, we take recent signs of economic weakness as a head fake.

Despite weak retail sales in March, consumer price inflation should be quiet for the month, and so we estimate that real (inflation-adjusted) consumer spending was up at a 2.3% annual rate in Q1. To put this in perspective, real spending is up 2% in the past year. Once again, no evidence of the higher payroll taxes taking a toll.

The same goes for the argument that the prior week’s reports on employment and manufacturing show the effect of higher payroll taxes. Private payrolls are up 171,000 per month so far this year and total hours worked up at a very solid 2.9% annual rate. Companies are hiring, but they are even more inclined than usual to increase hours for the workers they already have on staff. That suggests the health care law is a bigger problem than the payroll tax.

Yes, the ISM manufacturing index fell to 51.3 in March from 54.2 in February, but the index still signals growth and was 49.9 late last year.

None of this is to say that the economy will grow at exactly the same speed all year long. It won’t. Month to month variation is completely normal. But taking all of the data we’ve seen so far into account, it looks like real GDP grew at a 3% annual rate in Q1 and looks set to grow at about that rate again in Q2. After two years of roughly 2% real GDP growth, these are hardly the kind of numbers that say sequestration or the end of a temporary tax cut are hurting consumers.

For Americans, financial and economic Armageddon might be close at hand. The evidence for this conclusion is the concerted effort by the Federal Reserve and its dependent financial institutions to scare people away from gold and silver by driving down their prices.

When gold prices hit $1,917.50 an ounce on August 23, 2011, a gain of more than $500 an ounce in less than 8 months, capping a rise over a decade from $272 at the end of December 2000, the Federal Reserve panicked. With the US dollar losing value so rapidly compared to the world standard for money, the Federal Reserve’s policy of printing $1 trillion annually in order to support the impaired balance sheets of banks and to finance the federal deficit was placed in danger. Who could believe the dollar’s exchange rate in relation to other currencies when the dollar was collapsing in value in relation to gold and silver.

The Federal Reserve realized that its massive purchase of bonds in order to keep theirprices high (and thus interest rates low) was threatened by the dollar’s rapid loss of value in terms of gold and silver. The Federal Reserve was concerned that large holders of US dollars, such as the central banks of China and Japan and the OPEC sovereign investment funds, might join the flight of individual investors away from the US dollar, thus ending in the fall of the dollar’s foreign exchange value and thus decline in US bond and stock prices.

Intelligent people could see that the US government could not afford the long and numerous wars that the neoconservatives were engineering or the loss of tax base and consumer income from offshoring millions of US middle class jobs for the sake of executive bonuses and shareholder capital gains. They could see what was in the cards, and began exiting the dollar for gold and silver.

Central banks are slower to act. Saudi Arabia and the oil emirates are dependent on US protection and do not want to anger their protector. Japan is a puppet state that is careful in its relationship with its master. China wanted to hold on to the American consumer market for as long as that market existed. It was individuals who began the exit from the US dollar.

When gold topped $1,900, Washington put out the story that gold was a bubble. The presstitute media fell in line with Washington’s propaganda. “Gold looking a bit bubbly” declared CNN Money on August 23, 2011.

The Federal Reserve used its dependent “banks too big to fail” to short the precious metals markets. By selling naked shorts in the paper bullion market against the rising demand for physical possession, the Federal Reserve was able to drive the price of gold down to $1,750 and keep it more or less capped there until recently, when a concerted effort on April 2-3, 2013, drove gold down to $1,557 and silver, which had approached $50 per ounce in 2011, down to $27.

The Federal Reserve began its April Fool’s assault on gold by sending the word to brokerage houses, which quickly went out to clients, that hedge funds and other large investors were going to unload their gold positions and that clients should get out of the precious metal market prior to these sales. As this inside information was the government’s own strategy, individuals cannot be prosecuted for acting on it. By this operation, the Federal Reserve, a totally corrupt entity, was able to combine individual flight with institutional flight. Bullion prices took a big hit, and bullishness departed from the gold and silver markets. The flow of dollars into bullion, which threatened to become a torrent, was stopped.

For now it seems that the Fed has succeeded in creating wariness among Americans about the virtues of gold and silver, and thus the Federal Reserve has extended the time that it can print money to keep the house of cards standing. This time could be short or it could last a couple of years.

However, for the Russians and Chinese, whose central banks have more dollars than they any longer want, and for the 1.3 billion Indians in India, the low dollar price for gold that the Federal Reserve has engineered is an opportunity. They see the opportunity that the Federal Reserve has given them to purchase gold at $350-$400 an ounce less than two years ago as a gift.

The Federal Reserve’s attack on bullion is an act of desperation that, when widely recognized, will doom its policy.

As I have explained previously, the orchestrated move against gold and silver is to protect the exchange value of the US dollar. If bullion were not a threat, the government would not be attacking it.

The Federal Reserve is creating $1 trillion new dollars per year, but the world is moving away from the use of the dollar for international payments and, thus, as reserve currency. The result is an increase in supply and a decrease in demand. This means a falling exchange value of the dollar, domestic inflation from rising import prices, and a rising interest rate and collapsing bond, stock and real estate markets.

The Federal Reserve’s orchestration against bullion cannot ultimately succeed. It is designed to gain time for the Federal Reserve to be able to continue financing the federal budget deficit by printing money and also to keep interest rates low and debt prices high in order to support the banks’ balance sheets.

When the Federal Reserve can no longer print due to dollar decline which printing would make worse, US bank deposits and pensions could be grabbed in order to finance the federal budget deficit for couple of more years. Anything to stave off the final catastrophe.

The manipulation of the bullion market is illegal, but as government is doing it the law will not be enforced.

By its obvious and concerted attack on gold and silver, the US government could not give any clearer warning that trouble is approaching. The values of the dollar and of financial assets denominated in dollars are in doubt.

Those who believe in government and those who believe in deregulation will be proved equally wrong. The United States of America is past its zenith. As I predicted early in the 21st century, in 20 years the US will be a third world country. We are halfway there.

Respectfully, as I stated before - I have zero faith in Wesbury's analysis or predictions for two reasons:1) He advises the Federal Reserve Bank of Chicago, and therefore has a strong incentive to make that institution look good.2) He has a horrible track record going back at least to 2009 - as evidenced by the interview from that year I posted earlier.

I take his opinions with a grain of salt, but the Wesbury posts also contain facts in the sense of reported economic figures, and it is good to hear opposing opinions explained.

Industrial production rose 0.4% in March, beating the consensus expected gain of 0.2%. Including revisions to prior months, production was up 0.5%. Production is up 3.5% in the past year.Manufacturing, which excludes mining/utilities, declined 0.2% in March but was unchanged including upward revisions to prior months. Auto production rose 2.9% in March, while non-auto manufacturing declined 0.3%. Auto production is up 10.2% versus a year ago while non-auto manufacturing is up 1.9%.The production of high-tech equipment rose 0.2% in March, and is up 2.7% versus a year ago.Overall capacity utilization increased to 78.5% in March from 78.3% in February. Manufacturing capacity use declined to 76.4% in March from 76.6% in February.Implications: The Plow Horse economy continues. Industrial production rose 0.4% (+0.5% including revisions to prior months) and now stands at the highest level since March of 2008, very close to an all-time record high. However, on net, all the gain in March was due to higher output at utilities, the result of the relatively cold weather throughout much of the country. Manufacturing production declined 0.2% (unchanged including revisions to prior months) led by a 2.7% drop in primary metals. Auto production was up 2.9%. Next month, expect the reverse of what we had this month, with a rebound in manufacturing but a drop in utilities. The best way to check today’s report is to look at the underlying trend, which is still upward. Overall production is up 3.5% in the past year while manufacturing is up 3%. The autos sector has led the manufacturing gains, up 10.2% in the past year, but even manufacturing outside the auto sector has done OK, up 1.9% in the past year. We expect the gap between those two growth rates to narrow considerably in 2013, with slower growth (but still growth!) in autos and faster growth elsewhere in manufacturing. Capacity utilization rose to 78.5% in March, close to the average of 79.0% in the past 20 years, and the highest percent of capacity since 2008. Continued gains in production will push capacity use higher, which means companies will have an increasing incentive to build out plant and equipment. Meanwhile, corporate profits and cash on the balance sheet are at record highs, showing they have the ability to make these investments. In other news yesterday, the Empire State index, a measure of manufacturing sentiment in New York, declined to +3.0 in April from +7.0 in March. However, the index still suggests growth.

Here is my frank assessment of Wesbury: He lives in his own little universe of economic statistics, most of which are provided by the Federal government, and are severely distorted deliberately in this administration's favor. Of what significance is it that his charts and graphs show a recovering economy when the cold, hard evidence that there NEVER HAS BEEN A RECOVERY is plain to see all around us? I don't know if this guy truly believes this B.S. he is peddling, or if he is acting in what he believes is his own interest, without regard to truth. Having worked in the financial industry (banking) and met with investment bankers and advisors countless times during my tenure there (right out of college in the 1980's) I can tell you categorically that the majority of these economic prognosticators are nothing more than professional bullshit artists. It's quite evident when you look at their records over a long period of time. Wesbury is no different in that respect - in my educated opinion.

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"You have enemies? Good. That means that you have stood up for something, sometime in your life." - Winston Churchill.

At the same time Wesbury and Grannis (who is retired now btw and thus immune to any allegations of knowing on which side his bread is butered) offer us a different perspective than ours-- and ours has questions it does not really answer too. Therefore I offer Wesbury and Grannis so that we may ask ourselves good questions.

"Here is my frank assessment of Wesbury: He lives in his own little universe of economic statistics,"

- true, (they all do)

"most of which are provided by the Federal government,"

- true

and are severely distorted deliberately in this administration's favor.

- No, IMO. Most important economic statistics like the unemployment rate and the poverty rate are flawed measurements, but there is usually trend information to be learned from the movement in these measures.

"the cold, hard evidence that there NEVER HAS BEEN A RECOVERY"

- What did Clinton say, it depends on what the meaning of is is. We've had something like 37 months of job growth since the bottom, a recovery in name only. We've also lost 20% of our wealth that will never come back under the current stagnation agenda. I agree with you, that to recover means to fully recover - to at least get back to where we were. It is spin (BS?) to confuse recovery with pathetic, partial, upward movements.

My take from Wesbury or reading any of them is to read for the facts only, put the facts in context, and ignore the spin and take the analysis with active skepticism. I don't hold economists accountable for knowing the future. I judge them by how well they can analyze and explain what has already happened.

The 2009 Wesbury prediction of 5% was absurd, but based on a history of v-shaped 'curves' coming up from a drop that severe. He seemed to ignore the fact that most of the forces pushes us downward were still acting to push us downward. He coined the phrase plowhorse economy later to acknowledge the heavy load we are pulling.

Remember this: At the beginning of 2008, Wesbury, a supply sider, warned Republicans they would not win the election if they relied on a bad economy alone to defeat President Obama. He was right. The economy was stalled, but good enough for the incumbent to win all battleground states.

A fake tweet is apparently all it takes these days to briefly send financial markets into disarray.“Selling begets selling. It’s just the reality of the algo-driven world we live in,” said Seth Setrakian, co-head of domestic equities at First New York Securities, a brokerage firm. “It’s an environment when you act first and ask questions later.”Stocks briefly plunged after a tweet from the Associated Press’s Twitter account claimed that there were two explosions in the White House and that President Barack Obama had been injured. Markets quickly swung back after the AP said on its corporate website that its account had been hacked. The White House confirmed that there had been no incident.But the damage had been done. The Dow Jones Industrial Average dropped 145 points between 1:08 p.m. EDT and 1:10 p.m., following the fake tweet.The Dow recently rose 136 points in the final trading hour, led higher by DuPont DD +4.13% Bank of America BAC +2.99%, Travelers and Intel. Those stocks had been among the biggest gainers prior to the brief plunge.“Things appear to be back to normal now, but when you have some seismic event happen like this, you start second guessing everything,” Setrakian said. “It just goes to show how jittery the market is and how fragile investor confidence is right now.”Jonathan Krinsky, chief technical market analyst at Miller Tabak & Co. called the episode the “hack crash,” playing off the Flash Crash on May 6, 2010 that wiped almost 1,000 points off the Dow in a matter of minutes before it rebounded.“The initial move appears to be purely emotional and machine driven,” he said. “We would not be surprised to see some profit taking as we head into the close.”The episode also raises questions about the reliability of Twitter as a source of information. Earlier this month, federal securities regulators blessed the use of social-media sites, such as Facebook FB +0.04% and Twitter, to broadcast market-moving corporate news.“This should certainly makes people wary about information coming across Twitter,” said Dave Lutz, a managing director at Stifel, Nicolaus & Co. in Baltimore. “A human at the keyboard can be a lot more cool-headed about this stuff than the machines reading the headlines.”

U.S. companies are pulling back on borrowing, which could put a drag on the limping U.S. economy and make it even harder for banks to break out of their long slump.

Outstanding loans by the biggest banks to U.S. companies declined 9% in the first two weeks of April compared with the end of March, according to Federal Reserve data. The slip followed a 2.7% rise in the first quarter, the smallest quarterly gain in two years.

Bankers and corporate executives said the reluctance is a sign of uncertainty about rising health-care costs, fear of another economic downturn and a brutal winter in the Midwest that delayed new investment. Companies also rushed to borrow and spend late last year ahead of anticipated tax increases.

.Business owners "feel very, very hesitant to invest," and the economy is "struggling to get solid footing," but "we didn't expect the wall we hit," BB&T Corp. BBT -0.03%Chairman and Chief Executive Kelly King said last week. Outstanding business loans by the Winston-Salem, N.C., bank, the nation's 12th-largest by assets, were flat in the first quarter. "I think all of us are trying to figure out what happened."

Some executives said they are focusing on bolstering their cash hoards. R. Neil Williams, chief finance officer of financial-software provider Intuit Inc., INTU +0.98%said during the company's first-quarter-earnings call with analysts that "the plan going into this year was to let our cash position build up a bit from where we ended last year," after paying down half of the company's long-term debt in 2012.

New Clogs in Lending PipelineOutstanding commercial loans fell for many large and small banks in the first quarter of 2013 as business owners become more reluctant to borrow. The shift threatens one of the few bright spots for the U.S. banking industry and raises questions about the strength of the economic recovery. See a table of banks and their outstanding commercial loans.

At year-end, the nation's 7,000 banks had about $1.5 trillion in loans to large and medium-size businesses, or 20% of all bank loans, according to the Federal Deposit Insurance Corp. Outstanding loans reflect how much is owed on loans and lines of credit, and the numbers are widely considered a bellwether of borrower demand.

The recent slowdown is especially disconcerting because demand for other types of loans is cooling, too. Consumer lending dipped in the first quarter as the recent surge in mortgage borrowing ebbed. As a result, total loans fell 0.6% in the first quarter at the biggest U.S. banks and 0.2% at the smaller banks, according to Federal Reserve data compiled by Barclays BARC.LN -1.09%PLC analysts.

The drop in lending could turn around. New data showing commercial loans through the third week of April are due Friday, and economists say the slowdown might not persist for the rest of the year. Some companies, meanwhile, are turning to fixed-rate bonds instead of bank loans as a way of accessing debt.

Still, economists watch commercial loans closely, because borrowing by big companies has a huge ripple effect on the economy.

"It's not a good sign if loan growth is slowing," said Gus Faucher, a senior economist with PNC Financial Services Group Inc. PNC -0.55%While he said he wasn't worried about an imminent recession, he warned that "lending is important in keeping the economy going in order to allow businesses to expand."

The lending slowdown is placing more pressure on U.S. banks, already struggling to make money amid rock-bottom interest rates, new rules and a backlash on fees. If the slowdown lasts, some lenders might be forced to cut costs or get more aggressive on loan pricing as they look to poach clients from rival banks.

"Customers have a great deal of cash," and "they are sitting on the sidelines with that cash," said David Bochnowski, chief executive of Northwest Indiana Bancorp's Peoples Bank. "Until they really sense that demand is going to be in place, they are reluctant to expand."

Commercial-loan demand at the Munster, Ind., bank, with $691 million in assets and 12 branches, fell as businesses delayed construction amid a harsh winter that left snow on the ground last week. In a belt-tightening move last summer, Mr. Bochnowski put up signs in the bank's headquarters reminding employees to turn off the lights if no one else is in the building.

Ryan Alovis, chief executive of ArkNet Media Inc., a Valley Stream, N.Y., company that owns e-commerce sites such as LensDirect.com, said small businesses are more cautious about taking on more debt because health-care costs could rise with new laws that have been put in place. "Now it's a real issue," Mr. Alovis said. "It's really happening." ArkNet Media uses a credit line, but Mr. Alovis said he doesn't push it to the "edge" and that he won't take out new loans.

Phillip Dye, vice president at the five-man commercial-architecture firm Larsen Dye Associates Architects in Irving, Texas, said his firm isn't expanding, because his clients are worried about the economy. "None of them are going for loans," he said. "They do not want to endanger their businesses by going into a loan situation." The same goes for Larsen Dye, he said: "We're holding steady."

The pullback was more severe for the largest U.S. financial institutions, according to the Fed data. But the financial institutions that posted commercial-loan declines ranged in size from Wells Fargo WFC +0.03%& Co., the nation's fourth-largest lender, to the four-office Greater Sacramento Bancorp, GSCB -0.91%according to data from SNL Financial.

Comerica Inc., CMA -0.33%a Dallas bank with more than 60% of its $45 billion in loans tied up in businesses, saw its commercial loans outstanding drop 3.4% in the first quarter, according to SNL.

"A lot of our commercial customers are just hoarding their cash," said Bill Martin, chief executive and chairman of Bank of Sacramento, a unit of Greater Sacramento Bancorp that saw commercial loans outstanding drop 13% in the first quarter from the fourth quarter of 2012. "They're not expanding. They're not buying new equipment. There's still a lot of fear."

A Comerica spokesman attributed the drop in commercial loans in the first quarter to "strong seasonal growth we had going into the end of the year."

Wells Fargo Chief Financial Officer Timothy Sloan told analysts April 12 that "I wouldn't jump to any conclusions about loan growth in the industry in the first quarter," because the period is typically slower, and activity in the fourth quarter was "extremely high."

Some borrowers said banks remain reluctant to lend or are chasing the same supersafe borrowers, causing total loans to decline. Only 7% of banks that responded to a Fed loan-officer survey in January said they had eased credit standards on new loans to large and medium-size businesses.

Drop in Borrowing Squeezes Banks "we didn't expect the wall we hit,"..."I think all of us are trying to figure out what happened."

Unexpected? Trying to figure out what happened?? Someone thought killing off businesses wouldn't affect the banks that rely on the business of businesses? Did the people who didn't expect a business investment pullback not know about these new regulations, during a recession, to implement one new program alone, or that they would have a negative impact on commerce and commercial lending?Obamacare's new regulations. Is THIS what Madison had in mind?http://www.mcconnell.senate.gov/

The ISM manufacturing index declined to 50.7 in April from 51.3 in March, coming in above the consensus expected 50.5. (Levels higher than 50 signal expansion; levels below 50 signal contraction.)The major measures of activity were mixed in April but all remain above 50. The new orders index rose to 52.3 from 51.4 and the production index increased to 53.5 from 52.2, while the supplier deliveries index rose to 50.9 from 49.4. The employment index slipped to 50.2 from 54.2.The prices paid index dropped to 50.0 in April from 54.5 in March.Implications: Another plow horse report today for manufacturing. The ISM manufacturing index declined to 50.7, slightly better than consensus, and is still showing expansion in the factory sector. According to the Institute for Supply Management, an index level of 50.7 is consistent with real GDP growth of 2.7% annually. Both new orders and production have picked up in the past three months, a good sign going forward for further manufacturing gains. The worst news in today’s ISM report was that the employment index declined to 50.2, the lowest level since November 2012, confirming our forecast that the manufacturing sector probably lost jobs in April (we think 10,000) which will be reported in Friday’s Employment report. On the inflation front, the prices paid index declined to 50.0 in April from 54.5 in March. Given loose monetary policy, we expect inflation to gradually move higher. In other news this morning, the ADP Employment index, which measures private payrolls, increased 119,000 in April. This is a bit softer than the consensus expected gain of 150,000. But plugging today’s report into our payroll models suggests a gain of 170,000 nonfarm and 180,000 private. The official Labor report will be released Friday morning. In still other news this morning, construction declined 1.7% in March (-3.2% including revisions to prior months), well short of the consensus expected gain of 0.6%. Time will tell, but for now, it appears that unusually cold March temperatures held down building activity. Despite the weather, home building continued to grow in March. However, commercial construction declined 1.5% and government construction fell 4.1%, the steepest drop in more than a decade. The Case-Shiller index, which measures home prices in the 20 largest metro areas, increased 1.2% in February (seasonally-adjusted) and is up 9.3% from a year ago. The gain in February was the largest for any month since the peak of the housing boom in 2005. Recent price gains have been led by Las Vegas, Phoenix, San Francisco, and Los Angeles.

UNEMPLOYMENT - The U.S. Bureau of Labor Statistics reported Friday that the U.S. economy created 165,000 jobs in April and the unemployment rate fell to 7.5 percent from 7.6 percent.• The U-6 underemployment rate, which includes total unemployed, plus all unemployed persons who are available for work and have looked for work in the past year, plus total employed part time for economic reasons, increased to 13.9 percent from 13.8 percent in March.• The April unemployment rate for blacks was 13.2 percent and 9.0 percent for Hispanics.• The U-3 unemployment rate would be 10.9 percent of the labor force participation rate was the same as in January 2009